MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of Calderwood & Harkness LLP attorneys working on the referenced matter and the client to whom it is addressed. Any unauthorized disclosure, copying, or distribution is strictly prohibited.
TO: Vivienne St. Claire, Responsible Partner, Capital Markets
FROM: Eric Johannsen, Lead Associate, Capital Markets Claire Dempsey, Working Associate, Capital Markets
REVIEWED BY: Vivienne St. Claire
DATE: February 10, 2026
RE: Belmont Ridge Bank, National Association — Tier 2 Capital Qualification Analysis: $350,000,000 6.750% Fixed-to-Floating Rate Subordinated Notes due 2036
MATTER NO.: 1045-00001
I. Executive Summary
The purpose of this memorandum is to analyze whether the proposed $350,000,000 aggregate principal amount of 6.750% Fixed-to-Floating Rate Subordinated Notes due 2036 (the "Notes") to be issued by Belmont Ridge Bank, National Association ("BRB"), a nationally chartered commercial bank (OCC Charter No. 18742), qualify as Tier 2 capital under the Office of the Comptroller of the Currency's ("OCC") capital adequacy rules set forth in 12 C.F.R. Part 3, which implement the Basel III framework in the United States. This analysis examines each of the eligibility criteria enumerated in 12 C.F.R. § 3.20(d)(1) and assesses the terms of the Notes and the related Indenture against those criteria.
Based on the analysis set forth below, we conclude that the Notes satisfy each of the eligibility criteria for Tier 2 capital instruments under 12 C.F.R. § 3.20(d)(1), subject to the amortization provisions of 12 C.F.R. § 3.20(d)(1)(iv) during the final five years of the instrument's term and subject to receipt of OCC non-objection. We note that OCC non-objection was received on February 12, 2026, under OCC File No. 2026-SUB-0031, confirming that the OCC does not object to the proposed issuance on the terms described in BRB's pre-issuance notice.
Upon issuance, the Notes will rank pari passu with BRB's existing $200,000,000 5.250% Subordinated Notes due 2027 and any future pari passu subordinated debt of BRB. The Notes will be subordinated to all deposit liabilities and senior indebtedness of BRB, as required by applicable regulations.
With respect to the impact on BRB's regulatory capital position, the Notes will bolster BRB's total risk-based capital ratio, which currently stands at 14.2% as of December 31, 2025, by adding Tier 2 capital in the full principal amount of $350,000,000. BRB's Tier 1 capital ratio stands at 11.8% as of the same date. BRB reports total assets of $62.4 billion as of December 31, 2025. The issuance of the Notes is part of BRB's broader capital management strategy, which includes the potential future redemption of the existing 2027 subordinated notes and the funding of BRB's digital banking expansion initiative. The Notes provide a ten-year original maturity, affording BRB five full years of unreduced Tier 2 capital recognition before the mandatory 20%-per-year amortization commences, thereby supporting BRB's medium-term capital planning objectives.
II. Background and Transaction Overview
A. The Issuer
Belmont Ridge Bank, National Association is a national banking association chartered under the National Bank Act, 12 U.S.C. § 21 et seq., and supervised by the OCC. BRB operates under OCC Charter No. 18742, and is identified by RSSD ID 2847391 and FDIC Certificate No. 28463. BRB is headquartered at 600 Lexington Avenue, 38th Floor, New York, New York 10022.
BRB is the sole subsidiary of Belmont Ridge Financial Group, Inc. ("BRFG"), a Delaware corporation. BRFG is publicly listed on the New York Stock Exchange under the ticker symbol BRBK and is a registered bank holding company subject to supervision by the Board of Governors of the Federal Reserve System. BRFG does not conduct material business operations independent of BRB and serves primarily as the holding company for BRB and its subsidiaries.
BRB is a top-25 U.S. commercial bank by total assets, reporting $62.4 billion in total assets as of December 31, 2025, based on its most recent Call Report (FFIEC 031). BRB's principal lines of business include commercial lending (including commercial real estate, middle-market corporate lending, and asset-based lending), consumer banking (including residential mortgage origination, home equity lending, and consumer deposit-taking), wealth management (including trust and investment advisory services), and a growing financial technology platform branded "BRB Digital," which provides digital banking products and services to consumer and small business customers through BRB's proprietary mobile and web-based platforms.
The key officers of BRB relevant to this transaction are as follows:
• Marcus D. Harrington, Chief Executive Officer
• Priya Narasimhan, Chief Financial Officer
• Diane K. Wexler, General Counsel and Corporate Secretary
• Jonathan R. Talbott, Treasurer
The Board of Directors of BRB authorized the issuance of the Notes at a meeting held on January 15, 2026, by unanimous written consent. The Board resolution authorizes the issuance of subordinated debt securities in an aggregate principal amount not to exceed $400,000,000 and delegates to the Treasurer and the Chief Financial Officer the authority to determine the final terms within the parameters established by the Board.
B. The Notes
The principal terms of the Notes are summarized below. Unless otherwise indicated, all terms are as set forth in the draft Indenture dated as of February 7, 2026 (the "Draft Indenture"), which has been reviewed in connection with the preparation of this memorandum, and the related Preliminary Offering Memorandum dated February 3, 2026.
Instrument: 6.750% Fixed-to-Floating Rate Subordinated Notes due 2036.
Aggregate Principal Amount: $350,000,000.
Offering Type: Rule 144A private placement to qualified institutional buyers ("QIBs") under Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"). The Notes have not been and will not be registered under the Securities Act, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
Issue Price: 99.750% of par, resulting in gross proceeds to BRB of $349,125,000.
Coupon — Fixed Rate Period: 6.750% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, commencing September 1, 2026. The fixed rate coupon will apply from the issue date through (but not including) March 1, 2031.
Coupon — Floating Rate Period: Compounded SOFR plus 275 basis points per annum, payable quarterly in arrears on March 1, June 1, September 1, and December 1 of each year, commencing June 1, 2031. The floating rate coupon will apply from (and including) March 1, 2031 through maturity. "Compounded SOFR" is determined in accordance with the methodology set forth in the Indenture, based on the Secured Overnight Financing Rate as published by the Federal Reserve Bank of New York.
Fixed-to-Floating Rate Reset Date: March 1, 2031.
Maturity Date: March 1, 2036.
Optional Redemption: The Notes are callable at par (100% of principal amount) plus accrued and unpaid interest beginning on March 1, 2031 (the Reset Date). In addition, the Notes are redeemable upon a "Tax Event" or "Regulatory Capital Treatment Event" at any time at par plus accrued and unpaid interest. All redemptions are expressly subject to prior OCC approval, as discussed in detail in Section IV.H below.
Ranking: The Notes constitute subordinated unsecured obligations of BRB. The Notes rank junior to all senior indebtedness and deposit liabilities of BRB, rank pari passu with BRB's existing 5.250% Subordinated Notes due 2027 ($200,000,000 aggregate principal amount outstanding, issued November 15, 2017, maturing November 15, 2027) and any future subordinated debt issued on a pari passu basis, and rank senior to any junior subordinated debt and all classes of equity of BRB.
Indenture: The Notes will be issued pursuant to an Indenture dated as of February 24, 2026 (the expected Closing Date), between BRB, as issuer, and Brindoval Trust Company, National Association, as trustee (the "Trustee"). The Indenture is governed by New York law.
CUSIP: 082651 AB7.
ISIN: US082651AB73.
Ratings: BBB (stable outlook) by Meridian Ratings Group, Inc.; Baa2 (stable outlook) by Archer Bond Analytics LLC. The ratings reflect the subordinated position of the Notes in BRB's capital structure, which results in a notching below BRB's senior unsecured ratings.
Use of Proceeds: The net proceeds of the offering (estimated at approximately $345,700,000 after deducting initial purchasers' discounts and estimated offering expenses) will be used for general corporate purposes, including support of BRB's digital banking expansion through the BRB Digital platform and potential future redemption of the existing 5.250% Subordinated Notes due 2027. Pending application for such purposes, BRB expects to invest the net proceeds in short-term, investment-grade securities.
C. Parties. The following parties are involved in the transaction:
Lead Initial Purchaser / Lead Bookrunner: Wainwright Zanthor & Co., LLC, a registered broker-dealer and member of FINRA and SIPC.
Co-Managers / Initial Purchasers: Redstone Capital Markets LLC and Kensington Hale Securities Inc., each a registered broker-dealer and member of FINRA and SIPC.
Initial Purchasers' Counsel: Pennfield & Associates LLP.
Trustee, Paying Agent, Registrar, and Transfer Agent: Brindoval Trust Company, National Association.
Independent Auditors: Whitmore & Lathrop, P.C.
Issuer's Counsel: Calderwood & Harkness LLP.
The Initial Purchasers are acting in an arm's-length capacity and are not affiliates of BRB or BRFG. The Purchase Agreement among BRB and the Initial Purchasers (the "Purchase Agreement") is expected to be executed on or about February 20, 2026, with closing and settlement on February 24, 2026.
III. Applicable Regulatory Framework
A. Basel III Implementation — Overview
The Basel III framework was adopted by the Basel Committee on Banking Supervision ("Harborline Assurance") in December 2010 (revised June 2011) as a comprehensive set of reform measures designed to strengthen the regulation, supervision, and risk management of the banking sector. Among the central objectives of Basel III is the establishment of higher and more rigorous capital requirements, with a particular emphasis on the quality, consistency, and transparency of the capital base.
In the United States, the Basel III framework was implemented through interagency final rules issued jointly by the OCC, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation ("FDIC"), which became effective on January 1, 2015, with certain transitional phase-in provisions that have since been fully implemented. For national banks such as BRB, the OCC's capital adequacy rules are codified at 12 C.F.R. Part 3 (the "OCC Capital Rules").
Part 3 establishes minimum capital requirements, defines the components of regulatory capital, and prescribes the eligibility criteria for instruments to qualify for inclusion in each tier of capital. The regulatory capital framework distinguishes among three tiers of capital:
• Common Equity Tier 1 ("CET1") Capital, which represents the highest quality of capital and consists primarily of common stock, retained earnings, and accumulated other comprehensive income;
• Additional Tier 1 Capital, which includes instruments such as non-cumulative perpetual preferred stock and certain other instruments meeting the criteria of 12 C.F.R. § 3.20(c); and
• Tier 2 Capital, which includes subordinated debt instruments meeting the criteria of 12 C.F.R. § 3.20(d), together with eligible allowances for loan and lease losses, subject to applicable limits.
Together, Tier 1 capital (CET1 plus Additional Tier 1) and Tier 2 capital comprise "total capital" for purposes of calculating the total risk-based capital ratio.
BRB, as a national banking association, is subject to OCC supervision and examination and must comply with all requirements of Part 3. BRB files quarterly Call Reports (FFIEC 031) reflecting its capital position and risk-weighted assets, and is subject to the OCC's ongoing assessment of capital adequacy.
B. Tier 2 Capital — Statutory and Regulatory Basis
Section 3.20(d) of the OCC Capital Rules sets forth the criteria that an instrument must satisfy in order to qualify for inclusion in Tier 2 capital. These criteria are designed to ensure that Tier 2 instruments possess sufficient loss-absorbing characteristics to supplement Tier 1 capital in supporting the bank's risk-weighted asset base.
Tier 2 capital, together with Tier 1 capital, comprises "total capital" for purposes of calculating the total risk-based capital ratio under 12 C.F.R. § 3.10. The minimum capital ratios established by § 3.10 are as follows:
• CET1 Capital Ratio: 4.5% of risk-weighted assets;
• Tier 1 Capital Ratio: 6.0% of risk-weighted assets; and
• Total Capital Ratio: 8.0% of risk-weighted assets.
In addition, banking organizations are required to maintain a capital conservation buffer of 2.5% above these minimum ratios under 12 C.F.R. § 3.11, which, in the aggregate, results in effective minimum requirements of 7.0% for CET1, 8.5% for Tier 1, and 10.5% for total capital. A banking organization that fails to maintain capital above the buffer amounts is subject to limitations on capital distributions and discretionary bonus payments.
BRB's current total risk-based capital ratio of 14.2% is well above the 10.5% effective minimum requirement (including the capital conservation buffer). The issuance of the Notes will further strengthen BRB's total capital position by adding Tier 2 capital, providing additional capacity for asset growth, strategic investments, and continued compliance with regulatory capital requirements in stressed scenarios.
C. OCC Subordinated Debt Issuance Requirements
In addition to the substantive Tier 2 capital eligibility criteria set forth in § 3.20(d), the issuance of subordinated debt by national banks is subject to the procedural requirements of 12 C.F.R. § 5.47. Section 5.47 governs the issuance and prepayment of subordinated debt securities by national banks and establishes a notice-based review process administered by the OCC.
Under § 5.47, a national bank that is at least "adequately capitalized" and has received a composite rating of 1 or 2 under the Uniform Financial Institutions Rating System (CAMELS) at its most recent OCC examination may issue subordinated debt after filing a notice with the OCC and receiving non-objection. BRB meets both of these criteria: it is "well capitalized" under applicable regulatory standards and received a composite CAMELS rating of 2 at its most recent examination.
BRB filed its pre-issuance notice with the OCC describing the proposed terms of the Notes, the intended use of proceeds, and pro forma capital ratios. The OCC's non-objection letter was received on February 12, 2026, under OCC File No. 2026-SUB-0031. The non-objection confirms that the OCC does not object to the proposed issuance on the terms described in BRB's notice and is consistent with applicable capital rules.
Following closing, BRB is required to file a post-issuance notification with the OCC within the prescribed regulatory period, including final terms, the executed Indenture, and the form of the Global Note. Calderwood & Harkness is preparing this filing in draft form for submission by BRB's treasury group promptly after closing.
IV. Tier 2 Capital Eligibility Criteria — Element-by-Element Analysis
This Section IV provides a detailed element-by-element analysis of the Notes against each of the eligibility criteria for Tier 2 capital instruments set forth in 12 C.F.R. § 3.20(d)(1). For each criterion, we state the regulatory requirement, analyze the relevant terms of the Notes and the Indenture, and state our conclusion as to whether the criterion is satisfied.
A. Criterion 1: Issued and Paid-In (12 C.F.R. § 3.20(d)(1)(i))
Requirement. The instrument must be issued and paid-in. This criterion ensures that the instrument is an actual obligation of the issuing banking organization for which full cash consideration has been received, rather than a contingent or committed facility that has not yet been funded.
Analysis. The Notes will be issued on the Closing Date, which is expected to be February 24, 2026. On that date, the Notes will be authenticated and delivered by the Trustee to the Initial Purchasers (or their designees) against payment in full of the purchase price. Gross proceeds of $349,125,000, representing 99.750% of the $350,000,000 aggregate principal amount, will be received by BRB in immediately available funds via wire transfer to BRB's account at the Federal Reserve Bank of New York. The slight discount to par (0.250%) is customary in subordinated debt offerings and does not affect the paid-in nature of the instrument.
The Notes will be represented by a single Rule 144A Global Note in definitive form, deposited with The Depository Trust Company ("DTC"), with Cede & Co. acting as DTC's nominee. Beneficial interests in the Global Note will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its participants. This book-entry settlement mechanism is the standard approach for privately placed debt securities and does not raise any concerns under the issued-and-paid-in criterion.
Conclusion. Criterion 1 will be satisfied upon closing and settlement of the Notes on the Closing Date.
B. Criterion 2: Subordination (12 C.F.R. § 3.20(d)(1)(ii))
Requirement. The instrument must be subordinated to depositors and general creditors of the banking organization. This criterion is fundamental to the loss-absorbing character of Tier 2 capital, ensuring that holders of Tier 2 instruments bear losses before depositors and senior creditors in the event of the bank's insolvency or resolution.
Analysis. Article XIV of the Draft Indenture sets forth comprehensive subordination provisions that establish the Notes as subordinated unsecured obligations of BRB. Specifically, the Indenture provides that the Notes rank junior to all "Senior Indebtedness," which is defined in Section 1.01 of the Indenture to include, without limitation:
(a) all existing and future indebtedness for borrowed money of BRB (whether secured or unsecured) that does not expressly rank pari passu with or junior to the Notes;
(b) all deposit liabilities of BRB, including without limitation demand deposits, time deposits, savings deposits, and certificates of deposit, whether insured by the FDIC or otherwise;
(c) all obligations of BRB under letters of credit, acceptances, and similar instruments;
(d) all obligations of BRB to the FDIC (including in its capacity as receiver or conservator), the Federal Reserve, and any Federal Home Loan Bank; and
(e) all other indebtedness of BRB that by its terms ranks senior to the Notes.
The Notes rank pari passu with BRB's existing $200,000,000 5.250% Subordinated Notes due 2027 and any future subordinated debt that by its terms ranks pari passu with the Notes. The Notes rank senior only to junior subordinated debt of BRB (of which there is currently none outstanding) and all classes of equity of BRB, including common stock and preferred stock.
The subordination provisions of the Indenture are consistent with the requirements of 12 C.F.R. § 5.47 for subordinated debt issued by national banks. Section 5.47(b)(1)(i) requires that subordinated debt securities be unsecured and subordinated to the claims of depositors and other general creditors, which is precisely the structure reflected in the Indenture.
Under the Indenture, in the event of any liquidation, dissolution, or winding up of BRB (whether voluntary or involuntary), or in the event of any insolvency, receivership, conservatorship, or similar proceeding affecting BRB, all claims of holders of Senior Indebtedness and depositors must be satisfied in full before any payment or distribution may be made on account of the Notes. Furthermore, until all Senior Indebtedness is paid in full, any payment or distribution to which holders of the Notes would otherwise be entitled shall be paid or delivered directly to the holders of Senior Indebtedness (or to a trustee or agent on their behalf) for application in payment of all Senior Indebtedness remaining unpaid.
Conclusion. Criterion 2 is satisfied. The Notes are clearly subordinated to depositors and general creditors of BRB, in compliance with 12 C.F.R. § 3.20(d)(1)(ii) and 12 C.F.R. § 5.47(b)(1)(i).
C. Criterion 3: Not Secured or Guaranteed (12 C.F.R. § 3.20(d)(1)(iii))
Requirement. The instrument must not be secured, not covered by a guarantee of the issuer or an affiliate of the issuer, and not subject to any other arrangement that legally or economically enhances the seniority of the claim vis-à-vis the issuer's creditors. This requirement ensures that Tier 2 capital instruments absorb losses on an unsecured, unenhanced basis, consistent with their intended role in the bank's capital structure.
Analysis. The Notes are unsecured obligations of BRB. No collateral of any kind is pledged to secure the Notes, and the Indenture contains no provisions granting holders of the Notes any lien, security interest, or other encumbrance on any assets of BRB. The Notes are not subject to any negative pledge covenant that would effectively create a secured position for the holders.
No guarantee is provided by BRFG (the parent holding company) or any other affiliate of BRB. BRFG is not an obligor on the Notes and has no contractual obligation, whether express or implied, to make payments on the Notes or to backstop BRB's obligations thereunder. While certain representations, warranties, and covenants in the Purchase Agreement reference the consolidated financial condition and operations of the BRFG group for securities law disclosure purposes, such references do not constitute a guarantee, credit enhancement, or other arrangement that would enhance the seniority or recovery prospects of the Notes. These representations are customary in offering documents for bank-issued subordinated debt and are directed to the Initial Purchasers for purposes of their investment decision and due diligence, not for the benefit of subsequent holders in any credit-enhancing capacity.
The Indenture contains no credit enhancement feature of any kind, including no letter of credit backing, no surety bond, no credit default swap referencing BRB's creditworthiness for the benefit of holders, no keepwell agreement, and no other arrangement that would legally or economically enhance the seniority of the Notes' claim. We have reviewed the Draft Indenture and the related transaction documents and have identified no provision that would constitute such an arrangement.
Conclusion. Criterion 3 is satisfied. The Notes are unsecured, unguaranteed, and not subject to any arrangement that enhances the seniority of the claim.
D. Criterion 4: Minimum Maturity of Five Years / Amortization in Final Five Years (12 C.F.R. § 3.20(d)(1)(iv))
Requirement. The instrument must have a minimum original maturity of at least five years. In addition, the amount of the instrument that is includable in Tier 2 capital is subject to straight-line amortization during the final five years before maturity. Specifically, the includable amount is reduced by 20% per year (on a daily basis) during the last five years prior to the instrument's stated maturity date. This amortization provision reflects the declining loss-absorbing capacity of an instrument as it approaches maturity, when holders may begin to assert claims for repayment that compete with the interests of depositors and senior creditors.
Analysis.
Original Maturity. The Notes mature on March 1, 2036. The expected issuance date is February 24, 2026. Accordingly, the Notes will have an original maturity of approximately ten years and five days, which comfortably exceeds the five-year minimum required by § 3.20(d)(1)(iv). There is no circumstance under which the maturity of the Notes may be shortened to less than five years from the date of issuance, as the earliest possible redemption date (March 1, 2031) is itself approximately five years from the date of issuance, and all redemptions are subject to prior OCC approval.
Amortization Schedule. During the final five years before the Notes' stated maturity (i.e., from March 1, 2031, through March 1, 2036), the amount of the Notes includable in Tier 2 capital will be reduced by 20% per year on a straight-line basis, as follows:
The amortization schedule set forth above demonstrates that the Notes provide full Tier 2 capital recognition in the amount of $350,000,000 for the first five years of their term, from issuance through February 28, 2031. Beginning on March 1, 2031, the includable amount declines by $70,000,000 per year (20% of $350,000,000 par) until reaching zero in the final year before maturity.
Capital Planning Implications. The amortization schedule is directly relevant to BRB's capital planning. If BRB chooses to exercise its optional redemption on March 1, 2031 (the first call date, which coincides with the Fixed-to-Floating Rate Reset Date), the amortization would have just commenced, and the Notes would have provided full Tier 2 capital benefit for the preceding five years. BRB would then have the option to refinance the Notes with a new Tier 2-eligible instrument, thereby maintaining or enhancing its Tier 2 capital position. If BRB does not exercise the optional redemption, the Tier 2 capital contribution of the Notes will decline over the remaining five-year period in accordance with the schedule above.
Interaction with Existing 2027 Notes. BRB's existing $200,000,000 5.250% Subordinated Notes due 2027 were issued on November 15, 2017, and mature on November 15, 2027. The final five-year amortization period for the 2027 notes began on November 15, 2022. As a result, the Tier 2 capital recognition of the 2027 notes has been declining since that date and is substantially reduced as of the date of this memorandum. As of the expected Closing Date (February 24, 2026), approximately 21 months remain before the maturity of the 2027 notes, and their Tier 2 capital recognition has been reduced to approximately 40% of par (approximately $80,000,000), with further daily reductions. The issuance of the new Notes will therefore not only replace the declining Tier 2 capital contribution of the 2027 notes but will provide significant incremental Tier 2 capital, strengthening BRB's total capital position.
Conclusion. Criterion 4 is satisfied. The Notes have an original maturity of approximately ten years, well in excess of the five-year minimum. The regulatory amortization schedule will be applied during the final five years before maturity, as required.
E. Criterion 5: No Acceleration Clause (12 C.F.R. § 3.20(d)(1)(v))
Requirement. The instrument must not contain provisions that permit or require the holders to accelerate the repayment of principal except in the event of a receivership, insolvency, liquidation, or similar proceeding of the banking organization. This criterion is designed to ensure that Tier 2 capital instruments remain outstanding and available to absorb losses during periods of financial stress, rather than being subject to early repayment demands that could exacerbate the bank's difficulties.
Analysis. The Events of Default and remedies provisions of the Indenture (Articles V and VI of the Draft Indenture) have been carefully structured to comply with this requirement. The Events of Default under the Indenture are limited to the following:
(a) Failure to pay principal: BRB fails to pay the principal of any Note when due and payable, whether at maturity, upon redemption, or otherwise;
(b) Failure to pay interest: BRB fails to pay interest on any Note when due and payable, and such failure continues for a period of thirty (30) days after the applicable payment date;
(c) Covenant breach: BRB fails to observe or perform any other covenant, agreement, or condition contained in the Indenture or the Notes (other than those addressed in clauses (a) and (b)), and such failure continues for a period of sixty (60) days after written notice thereof is given to BRB by the Trustee or by holders of not less than 25% in aggregate principal amount of the Notes then outstanding; and
(d) Receivership, insolvency, or liquidation: A decree or order is entered by a court of competent jurisdiction appointing a receiver, conservator, or liquidator for BRB in any insolvency, readjustment of debt, marshaling of assets, or similar proceedings, or for the winding up or liquidation of BRB's affairs, or BRB consents to the appointment of a receiver, conservator, or liquidator in any such proceeding, or the FDIC is appointed as receiver or conservator of BRB.
Critically, the Indenture provides that upon an Event of Default described in clauses (a), (b), or (c) above, the sole remedy available to the Trustee and the holders is not acceleration of the entire principal amount of the Notes. Rather, the Indenture provides that the principal of all outstanding Notes may be declared immediately due and payable only in the event of an Event of Default described in clause (d) — that is, only upon the occurrence of a receivership, insolvency, liquidation, conservatorship, or similar proceeding affecting BRB. For Events of Default described in clauses (a), (b), and (c), the remedies available to the Trustee and the holders are limited to the following:
(i) The Trustee may, and upon the direction of holders of not less than 25% in aggregate principal amount of the outstanding Notes shall, institute judicial proceedings for the collection of amounts then due and payable on the Notes (i.e., past-due principal or interest), but may not accelerate the maturity of the Notes or declare the entire principal amount to be immediately due and payable;
(ii) The Trustee may, and upon the direction of holders of not less than 25% in aggregate principal amount of the outstanding Notes shall, pursue equitable remedies, including specific performance and injunctive relief, to compel BRB's compliance with its obligations under the Indenture; and
(iii) The holders may exercise any other remedies available at law or in equity, provided that no such remedy shall include the right to accelerate the principal of the Notes.
This remedial structure — permitting acceleration only upon receivership, insolvency, liquidation, or similar proceedings and limiting holders' remedies for other Events of Default to collection of past-due amounts and equitable relief — is consistent with OCC guidance on subordinated debt instruments qualifying as Tier 2 capital and with the requirements of 12 C.F.R. § 5.47(b)(1)(iii), which mandates that subordinated debt of national banks include such limitations.
Furthermore, the Indenture does not contain cross-default or cross-acceleration provisions with respect to BRB's other indebtedness. A cross-default provision — under which a default on other indebtedness of BRB would constitute an Event of Default under the Indenture — could create an indirect acceleration right that would be inconsistent with the requirements of § 3.20(d)(1)(v). The absence of any such provision in the Indenture ensures that the Notes cannot be accelerated as a result of events affecting BRB's other obligations.
Conclusion. Criterion 5 is satisfied. The Indenture limits acceleration of the Notes' principal to events of receivership, insolvency, liquidation, or similar proceedings, and does not permit acceleration for any other Event of Default.
F. Criterion 6: No Credit-Sensitive Feature (12 C.F.R. § 3.20(d)(1)(vi))
Requirement. The instrument must not have a credit-sensitive feature, such as a dividend or coupon that is adjusted periodically based in whole or in part on the banking organization's credit standing. This requirement prevents instruments from imposing increased funding costs on the bank at precisely the time when it can least afford them — namely, when its credit quality is deteriorating — which could accelerate a downward spiral and undermine the instrument's loss-absorbing capacity.
Analysis. The coupon structure of the Notes does not include any credit-sensitive feature:
Fixed Rate Period (February 24, 2026 through February 28, 2031). During this period, the Notes bear interest at a fixed rate of 6.750% per annum. The fixed coupon rate was determined through the book-building process and reflects market conditions and BRB's credit profile as of the pricing date. Once set, the coupon is not subject to adjustment based on any factor, including BRB's credit standing, credit ratings, financial condition, or operating performance. A fixed coupon rate is, by its nature, not credit-sensitive.
Floating Rate Period (March 1, 2031 through March 1, 2036). During this period, the Notes bear interest at a floating rate equal to Compounded SOFR plus 275 basis points per annum. The Secured Overnight Financing Rate ("SOFR") is a broad-market reference rate published by the Federal Reserve Bank of New York, reflecting the cost of borrowing cash overnight collateralized by U.S. Treasury securities in the repurchase agreement market. SOFR is not tied to BRB's creditworthiness or to the creditworthiness of any individual banking organization. The spread of 275 basis points above SOFR is a fixed spread that does not adjust based on BRB's credit rating, financial condition, or any other credit-related metric. The floating rate mechanism therefore reflects general interest rate movements in the broader market, not BRB-specific credit risk.
There is no step-up coupon feature tied to credit triggers (such as a coupon increase upon a credit rating downgrade), no coupon adjustment mechanism tied to BRB's capital ratios or other financial metrics, and no conversion or exchange feature triggered by credit events. The fixed-to-floating rate structure — transitioning from a fixed coupon to a floating coupon based on SOFR plus a fixed spread — is a standard market feature in bank subordinated debt and does not constitute a credit-sensitive feature for purposes of § 3.20(d)(1)(vi).
Conclusion. Criterion 6 is satisfied. The Notes do not contain a credit-sensitive feature.
G. Criterion 7: Not Purchased by the Banking Organization or an Affiliate (12 C.F.R. § 3.20(d)(1)(vii))
Requirement. The banking organization has not purchased, and has not directly or indirectly funded the purchase of, the instrument. This requirement prevents a bank from artificially inflating its regulatory capital by purchasing its own Tier 2 instruments or providing funding to third parties for that purpose, which would not represent genuine external capital.
Analysis. The Notes are being sold to qualified institutional buyers in a Rule 144A offering. BRB is not purchasing any of the Notes and has no intention to do so. The Initial Purchasers — Wainwright Zanthor & Co., LLC, Redstone Capital Markets LLC, and Kensington Hale Securities Inc. — are independent third-party broker-dealers that are not affiliates of BRB or BRFG. The Initial Purchasers are purchasing the Notes as principals for resale to QIBs in compliance with Rule 144A under the Securities Act.
Neither BRFG nor any other affiliate of BRB is purchasing the Notes or providing funding for the purchase of the Notes. The Purchase Agreement includes an express representation from BRB that it has not and will not, directly or indirectly, fund or facilitate the purchase of the Notes by any person or entity for the purpose of enabling BRB to count the Notes as regulatory capital.
We note that this criterion requires ongoing compliance. If, at any time after issuance, BRB or an affiliate were to purchase Notes in the secondary market, such purchased Notes would need to be deducted from BRB's Tier 2 capital to the extent required by applicable regulations. BRB's treasury and compliance functions should be aware of this ongoing obligation.
Conclusion. Criterion 7 is satisfied as of issuance, subject to ongoing compliance with the prohibition on self-purchase.
H. Criterion 8: Redemption — Prior Regulatory Approval (12 C.F.R. § 3.20(d)(1)(viii))
Requirement. If the instrument is callable by the banking organization, it may not be redeemed prior to its stated maturity without the prior approval of the OCC. This requirement ensures that the OCC retains supervisory control over the bank's capital base and can prevent premature redemptions that could compromise capital adequacy.
Analysis. The Notes include three distinct optional redemption features, each of which is expressly conditioned on the prior receipt of OCC approval or non-objection:
Par Call Beginning March 1, 2031. BRB may redeem the Notes, in whole or in part, on any interest payment date on or after March 1, 2031 (the Fixed-to-Floating Rate Reset Date), at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest thereon to (but excluding) the redemption date. This optional redemption is expressly subject to the prior approval of the OCC, as required by 12 C.F.R. § 3.20(d)(1)(viii) and 12 C.F.R. § 5.47. The Indenture provides that BRB shall not give notice of redemption unless it has received such approval from the OCC.
Tax Event Redemption. BRB may redeem the Notes, in whole but not in part, at any time at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest, upon the occurrence of a "Tax Event." As defined in Section 1.01 of the Draft Indenture, a "Tax Event" means a change in or amendment to the laws (or any regulations or rulings promulgated thereunder) of the United States, or any change in or amendment to an official position regarding the application, administration, or interpretation of such laws, regulations, or rulings (including by the Internal Revenue Service or a court of competent jurisdiction), which change or amendment is announced or becomes effective after the date of the Indenture and as a result of which there is more than an insubstantial risk that interest payable by BRB on the Notes is not, or within 90 days of the date of such determination will not be, deductible by BRB, in whole or in part, for United States federal income tax purposes. This redemption is expressly subject to prior OCC approval.
Regulatory Capital Treatment Event Redemption. BRB may redeem the Notes, in whole but not in part, at any time at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest, upon the occurrence of a "Regulatory Capital Treatment Event." As defined in Section 1.01 of the Draft Indenture, a "Regulatory Capital Treatment Event" means the good faith determination by BRB that, as a result of (i) any amendment to, or change in, the laws, rules, or regulations of the United States (including 12 C.F.R. Part 3) or any applicable rules, guidelines, or policies of the OCC, or (ii) any official administrative pronouncement or judicial decision interpreting or applying such laws, rules, or regulations, which amendment or change is effective or which pronouncement or decision is announced after the date of the Indenture, there is more than an insubstantial risk that BRB will not be entitled to treat the full principal amount of the Notes then outstanding as Tier 2 capital (or its then equivalent) for purposes of the capital adequacy rules of the OCC, as then in effect and applicable to BRB. This redemption is also expressly subject to prior OCC approval.
In each case, the Indenture requires that BRB shall have received, prior to giving notice of redemption, the written approval or non-objection of the OCC to the proposed redemption, in accordance with 12 C.F.R. § 3.20(d)(1)(viii) and 12 C.F.R. § 5.47. The Indenture further provides, in Section 3.04, that any purported notice of redemption given without the prior written approval of the OCC shall be null and void and of no force or effect, and that any attempted redemption without such approval shall not constitute a valid redemption of the Notes.
No Investor Put Option. The Notes do not include any put option, mandatory repurchase obligation, or other provision that gives the holders the right to require BRB to redeem, repurchase, or repay the Notes prior to the stated maturity date. Such a provision would be inconsistent with Tier 2 capital treatment, as it would give holders the ability to withdraw capital from the bank at their discretion. The absence of any such provision further supports the Notes' qualification as Tier 2 capital.
Alignment of First Call Date with Amortization Schedule. It bears noting that the first optional redemption date (March 1, 2031) coincides precisely with the commencement of the 20%-per-year amortization period described in Section IV.D above. This alignment is a common and deliberate structuring technique in bank subordinated debt offerings. By establishing the first call date at the five-year mark, BRB retains the flexibility to redeem the Notes at a point when their Tier 2 capital benefit begins to decline due to regulatory amortization, and to replace them with a newly issued Tier 2 instrument providing full capital recognition. From the investors' perspective, the fixed-to-floating rate reset on the same date provides an economic incentive for BRB to exercise the call, as the transition to a floating rate coupon may make the Notes more expensive than a newly priced fixed-rate instrument, depending on market conditions at that time.
Conclusion. Criterion 8 is satisfied. All optional redemption features are expressly conditioned on prior OCC approval, and the Indenture provides that any redemption without such approval is void. There is no investor put option.
I. Criterion 9: Ability to Cancel Dividends/Coupons Without Triggering Default (Not Applicable)
Requirement. Under the Basel III framework as implemented by the OCC, Additional Tier 1 capital instruments are required to include a provision permitting the issuer to cancel dividend or coupon payments at its discretion without triggering an event of default. See 12 C.F.R. § 3.20(c)(1)(v). This requirement applies exclusively to Additional Tier 1 instruments and is designed to ensure that such instruments have a level of equity-like loss-absorbing capacity that permits the issuer to conserve capital by suspending distributions.
Analysis. For Tier 2 capital instruments, there is no corresponding requirement that the issuer have the ability to cancel or defer coupon payments at its discretion. Under § 3.20(d), Tier 2 instruments may have mandatory coupon payment obligations that are fully enforceable by the holders, and the failure to make such payments may constitute an Event of Default under the Indenture (subject to the limitations on remedies described in Section IV.E above). The Notes' coupon payments — both the 6.750% fixed rate during the Fixed Rate Period and the Compounded SOFR plus 275 basis points during the Floating Rate Period — are mandatory obligations of BRB. Failure to pay interest when due and payable constitutes an Event of Default under the Indenture (subject to a 30-day cure period), which is permissible for Tier 2 instruments.
Conclusion. This criterion is not applicable to Tier 2 capital instruments. The mandatory nature of the Notes' coupon payments is permissible and raises no concern under § 3.20(d).
V. OCC Prior Approval and Filing Requirements
A. Pre-Issuance Notice under 12 C.F.R. § 5.47
As discussed in Section III.C above, BRB filed a pre-issuance notice with the OCC in accordance with 12 C.F.R. § 5.47 prior to the proposed issuance of the Notes. The notice, prepared with the assistance of Calderwood & Harkness and BRB's internal legal and treasury teams, described the proposed terms of the Notes, the intended use of proceeds (general corporate purposes, digital banking expansion, and potential future redemption of the existing 5.250% Subordinated Notes due 2027), and pro forma regulatory capital ratios reflecting the impact of the issuance.
The OCC's non-objection letter was received on February 12, 2026, under OCC File No. 2026-SUB-0031. The non-objection letter confirms that, based on the information provided in BRB's notice, the OCC does not object to the proposed issuance of the Notes on the terms described therein and that the proposed issuance is consistent with applicable capital rules. The non-objection is subject to the condition that the final terms of the Notes be substantially consistent with those described in BRB's pre-issuance notice, which we expect will be the case based on the terms currently contemplated.
B. Post-Issuance Notification
Under 12 C.F.R. § 5.47, BRB is required to file a post-issuance notification with the OCC within the regulatory prescribed period following the closing of the offering. The post-issuance notification must include the final terms of the Notes, a copy of the executed Indenture, the form of the Global Note, and such other documentation as the OCC may require.
Calderwood & Harkness is preparing the post-issuance notification in draft form for BRB's review and submission to the OCC promptly after closing on the expected Closing Date of February 24, 2026. BRB's treasury group, under the direction of Jonathan R. Talbott, will be responsible for ensuring timely filing of the notification. We recommend that the post-issuance notification be submitted no later than five business days after closing.
C. Federal Reserve and FDIC
No separate Federal Reserve approval is required for BRB's issuance of the Notes. BRB is a national bank supervised by the OCC, and the issuance of subordinated debt by a national bank is governed by the OCC's rules under 12 C.F.R. § 5.47. However, BRFG, as BRB's holding company, is a registered bank holding company subject to Federal Reserve supervision and reporting requirements. BRFG will be required to reflect the new Tier 2 capital from the Notes on its consolidated regulatory reports, including its FR Y-9C (Consolidated Financial Statements for Holding Companies), beginning with the reporting period in which the Notes are issued.
No separate FDIC approval is required for the issuance. BRB is a "well capitalized" institution as defined in 12 C.F.R. § 6.4, with a total risk-based capital ratio of 14.2% and a Tier 1 capital ratio of 11.8%, both well in excess of the applicable minimums. The FDIC will be aware of the issuance through BRB's Call Report filings, which will reflect the Notes as subordinated debt in the appropriate line items beginning with the March 31, 2026 Call Report.
VI. Impact on BRB's Regulatory Capital Ratios
A. Current Capital Position (as of December 31, 2025)
Based on BRB's most recent Call Report (FFIEC 031) filed for the quarter ended December 31, 2025, BRB's key regulatory capital metrics are as follows:
BRB's existing $200,000,000 5.250% Subordinated Notes due 2027 were issued on November 15, 2017, and mature on November 15, 2027. These notes have been in their final five-year amortization period since November 15, 2022 (five years prior to maturity). As of December 31, 2025, the amortized Tier 2 capital recognition of the existing notes has been reduced to approximately 40% of par, or approximately $80,000,000, reflecting the passage of more than three years of the five-year amortization period. This amount will continue to decline on a daily basis until maturity.
B. Pro Forma Capital Impact
Upon issuance of the Notes, the full $350,000,000 aggregate principal amount will be includable as Tier 2 capital, subject to the amortization schedule described in Section IV.D above (commencing March 1, 2031). On a pro forma basis as of the expected Closing Date, the issuance of the Notes will increase BRB's Tier 2 capital by $350,000,000 (before any reduction for the continuing amortization of the existing 2027 notes).
The net incremental Tier 2 capital from the Notes — after accounting for the ongoing amortization of the existing 2027 notes — will be approximately $270,000,000 as of the Closing Date (i.e., $350,000,000 new Tier 2 capital minus approximately $80,000,000 of remaining recognized Tier 2 capital from the 2027 notes, assuming no early redemption of the 2027 notes). If BRB subsequently redeems the 2027 notes using a portion of the proceeds from this offering, the reduction in Tier 2 capital from the retirement of the 2027 notes would be equal to their then-remaining Tier 2 recognition (which is declining daily), and the net increase in total Tier 2 capital from the combined transactions would be the new $350,000,000 minus the retired 2027 notes' remaining recognition.
The pro forma total risk-based capital ratio will increase from 14.2% to an estimated approximately 14.9%, reflecting the addition of $350,000,000 in new Tier 2 capital to the denominator-risk-weighted asset base that remains approximately stable at $47.8 billion. This estimate is illustrative and is subject to change based on risk-weighted asset growth, changes in Tier 1 capital, and other factors between December 31, 2025 and the Closing Date.
C. Capital Planning Considerations
BRB management has indicated to Calderwood & Harkness that a portion of the net proceeds of the offering (estimated at $345,700,000 after initial purchasers' discounts and estimated offering expenses) may be used to fund the future redemption of the existing 5.250% Subordinated Notes due 2027, though no formal redemption notice has been given and no decision to redeem has been finalized. The 2027 notes are currently callable (the first call date was November 15, 2022), and any redemption would be subject to prior OCC approval under 12 C.F.R. § 5.47.
The Notes' ten-year original maturity provides BRB with a five-year window of full, unreduced Tier 2 capital recognition before the regulatory amortization begins on March 1, 2031. This extended period of full capital recognition supports BRB's strategic capital planning objectives, including the planned expansion of BRB's digital banking platform (BRB Digital), which is expected to require significant capital deployment over the next three to five years.
The first optional redemption date of March 1, 2031 aligns precisely with the start of the amortization schedule, providing BRB with the option to refinance the Notes before significant Tier 2 capital dilution occurs. This structuring feature gives BRB maximum flexibility in managing its capital stack and minimizing the cost of regulatory capital over time.
VII. Comparison with Existing Subordinated Debt
The following table compares the key terms of the new Notes with BRB's existing subordinated debt:
The new Notes are structurally consistent with the existing 2027 notes in terms of subordination, ranking, and Tier 2 capital eligibility. The principal evolution in market terms reflected in the new Notes is the fixed-to-floating rate coupon structure, which has become the predominant structure for bank subordinated debt offerings in recent years, and the use of SOFR as the floating rate reference, replacing the LIBOR-based conventions that were standard at the time the 2027 notes were issued. The transition from LIBOR to SOFR reflects the industry-wide shift mandated by the Alternative Reference Rates Committee and the cessation of U.S. dollar LIBOR panel bank submissions in June 2023.
The pari passu ranking of the two series of subordinated notes ensures that holders of both series will share ratably in any distributions in the event of BRB's insolvency or liquidation, after satisfaction of all senior indebtedness and deposit claims. This ranking is clearly set forth in the subordination provisions of both the new Indenture and the existing 2017 indenture.
VIII. Summary of Compliance — Checklist Format
The following table summarizes the element-by-element compliance analysis set forth in Section IV above:
All eight criteria are satisfied. The Notes qualify as Tier 2 capital instruments under 12 C.F.R. § 3.20(d)(1).
IX. Risk Factors and Qualifications
The analysis set forth in this memorandum is subject to the following assumptions, limitations, and qualifications:
1. Draft Documents. The analysis is based on the Draft Indenture dated February 7, 2026 and the related transaction documents reviewed in connection with the preparation of this memorandum. We assume that the Indenture will be executed in substantially the form reviewed, without material modification to the terms relevant to the Tier 2 capital analysis. Any material changes to the Indenture between the date of this memorandum and the Closing Date should be brought to our attention for supplemental review.
2. Closing and Settlement. The analysis assumes that the Notes will be duly authorized, executed, authenticated, delivered, and settled on the Closing Date (expected February 24, 2026), and that BRB will receive the full gross proceeds of the offering ($349,125,000) in immediately available funds on such date.
3. No Change in Law. The analysis assumes that there will be no changes in applicable law, regulation, or regulatory interpretation between the date of this memorandum and the Closing Date that would alter the Tier 2 capital eligibility criteria or the requirements for issuance of subordinated debt by national banks. We note that the regulatory landscape for bank capital requirements continues to evolve, and future regulatory changes (including potential implementation of the Basel III "endgame" rules) could affect the capital treatment of the Notes prospectively.
4. No Self-Purchase. The analysis assumes that BRB will not purchase, and will not directly or indirectly fund the purchase of, the Notes, either at issuance or at any time thereafter. Compliance with this criterion is an ongoing obligation, and any future acquisition of the Notes by BRB or an affiliate would require appropriate regulatory capital treatment (including potential deduction from Tier 2 capital).
5. Regulatory Changes. Changes in OCC regulations, policy statements, interpretive guidance, or examination practices could affect the Tier 2 capital treatment of the Notes in the future. This risk is the basis for the inclusion of the "Regulatory Capital Treatment Event" redemption provision in the Indenture, which would allow BRB to redeem the Notes if they cease to qualify as Tier 2 capital due to a change in law or regulatory interpretation.
6. Scope of Memorandum. This memorandum is prepared for internal Calderwood & Harkness use only and for the use of BRB and BRFG in connection with the referenced transaction. It does not constitute a legal opinion regarding the due authorization, valid issuance, binding effect, or enforceability of the Notes, the Indenture, or any related transaction document. A formal closing opinion addressing these matters, together with opinions on securities law compliance and other customary matters, will be delivered by Calderwood & Harkness to the Initial Purchasers at closing, in accordance with the terms of the Purchase Agreement.
7. Tax Matters. This memorandum does not address the U.S. federal, state, or local income tax treatment of the Notes, including the deductibility of interest payments by BRB, the tax treatment of the original issue discount arising from the issuance of the Notes at 99.750% of par, or the tax consequences to holders. These matters are the subject of separate tax advice being provided by BRB's tax advisors.
X. Conclusion
Based on the foregoing analysis, we conclude that the 6.750% Fixed-to-Floating Rate Subordinated Notes due 2036 satisfy all of the eligibility criteria for Tier 2 capital instruments under 12 C.F.R. § 3.20(d)(1)(i) through (viii). Each element of the regulatory framework has been addressed in the terms of the Indenture and the Notes, and we have identified no provision in the transaction documents that would be inconsistent with Tier 2 capital qualification.
The Notes will be fully includable as Tier 2 capital from the date of issuance through February 28, 2031, in the full aggregate principal amount of $350,000,000. Thereafter, the includable amount will be subject to straight-line 20%-per-year amortization through the stated maturity date of March 1, 2036, declining from 80% to 0% of par over that five-year period, in accordance with 12 C.F.R. § 3.20(d)(1)(iv).
OCC non-objection to the proposed issuance has been received under OCC File No. 2026-SUB-0031, dated February 12, 2026, satisfying the pre-issuance notice requirement of 12 C.F.R. § 5.47.
BRB's post-issuance filing obligations under 12 C.F.R. § 5.47 should be completed promptly after the closing on February 24, 2026. Calderwood & Harkness will provide BRB with a draft of the post-issuance notification for review and submission to the OCC.
We are available to discuss the foregoing analysis at your convenience. Please do not hesitate to contact us with any questions.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Eric Johannsen Lead Associate, Capital Markets
By: ________
Claire Dempsey Working Associate, Capital Markets
Reviewed and Approved:
By: ________